In the United States, poison pills can exist indefinitely and boards have more clout, says Kevin Morris in The Globe and Mail Report on Business

Agrium Extends Bid for CF Industries

Agrium's seven-month-long hostile pursuit of Illinois fertilizer company CF Industries Holdings has been prolonged as Agrium frames its pursuit as a shareholder referendum.

CF's shareholder rights plan or "poison pill" prevents a would-be buyer from taking up shares tendered to the offer. The fact that CF is a U.S. company registered in Delaware further complicates the transaction, says Kevin Morris: "There's more power for the board in the States." In Canada, poison pills are designed to give a takeover target time to look for a white knight bidder or examine alternatives. But eventually, securities regulators could decide enough time has elapsed and nix the shareholder rights plan. In the United States, poison pills can exist indefinitely.

"Boards are given a lot more discretion in the United States to let rights plans just sit there, as opposed to in Canada, where eventually they're rendered ineffective," says Kevin.

Agrium's strategy so far has been to try to get CF shareholders to pressure their recalcitrant board into ceding to the bid. Another possible tactic would be to try to get Agrium nominees elected to CF's board of directors, at which point it could move to get rid of the poison pill and clear the way for the transaction. A less likely option would be to try and get shareholders to file lawsuits against the CF board, claiming directors failed to act in investors' best interests, adds Kevin, calling it "a pretty heavy-handed approach." Such actions have generally not worked in the United States, he says, where boards are given more clout.